Post Views: 242 •Blames AfDB For Nigeria, S’Africa’s Debt Level World Bank Group President, David Malpass, on Monday, accused the Asian Development Ba...
•Blames AfDB For Nigeria, S’Africa’s Debt Level
World Bank Group President, David Malpass, on Monday, accused the Asian Development Bank, African Development Bank, and European Bank for Reconstruction and Development of lending too quickly to heavily indebted countries, thereby helping to worsen already-challenging debt situations of such nations.
Malpass, who spoke at a World Bank-International Monetary Fund debt forum in Washington, according to Reuters, blamed them for contributing to global debt problems.
According to him, “we have a situation where other international financial institutions and to some extent development finance institutions as a whole, certainly the official export credit agencies, have a tendency to lend too quickly and to add to the debt problem of the countries.”
Specifically, he accused the Asian Development Bank of “pushing billions of dollars” into a fiscally challenging situation in Pakistan, while the African Development Bank was doing the same in Nigeria and South Africa.
This is coming at a time many domestic and international analysts and experts have expressed worry over Nigeria’s public debt level, even as the government insists the country’s debt-to-GDP level remains low, allowing the country to absorb more loans.
From N12.118tr public debt when the Muhammadu Buhari administration assumed office first in June 2015, Nigeria’s public debt has ballooned to N26.215tr as at the end of September last year, according to the country’s Debt Management Office (DMO) in January.
This represents a growth N14tr or 116.33% of new loans by the Federal and State Governments in the country in the five-year period, even as the government plans to borrow N2tr from the nation’s N10tr pension funds for infrastructure financing, a move the organized labour says it would resist.
Incidentally, Dr. Akinwunmi Adesina, President of the AfDB is a former Minister of Agriculture in the Goodluck Jonathan administration that ended on May 29, 2015, from where he clinched the top job.
A spokesman for the Asian Development Bank could not immediately be reached for comment, according to Reuters, even as the Manila-based development lender in December approved $1.3bn in loans for Pakistan. This included $1bn for immediate budget support to shore up the country’s public finances and $300 million to help reform the country’s energy sector.
The loans came as the country continues to struggle with billions of dollars in debt to China from Belt and Road infrastructure projects, which helped cause Pakistan to turn to the International Monetary Fund for a $6tr loan programme in 2019.
Malpass noted the need for more coordination among international financial institutions to coordinate lending and maintain high standards of transparency.
“And so we have a very real problem of the IFIs themselves adding to the debt burden and, and there’s pressure then I think on the IMF to sort through it and look at the best interest for the country,” he said.
Malpass also said that the new Beijing-led Asian Infrastructure Investment Bank was seeking to develop lending standards that were equal to those of the World Bank and was causing fewer problems than some of the more traditional development lenders.
Although China often gets blamed for burdening some developing economies through Belt and Road, Malpass said the country was looking for ways to bring its debt contracts in line with international norms.
One way to do this is to improve transparency in lending contracts, to eliminate non-disclosure clauses that have hidden liens and contingent liabilities that could hamper economic growth.
In an interview, Malpass cited liens against Angola’s oil revenues associated with Chinese debt that were hidden by non-disclosure agreements, convenient for politicians and contractors.
“Let the people of the country see what the terms of the debt are as their government makes commitments,” Malpass said.
The World Bank’s fund for the poorest countries, the International Development Association, is implementing a new set of lending rules on July 1 as it unlocks a new round of funding expected to make some $85bn in loans and grants available.
These are aimed at setting new standards for transparency and require coordination with other multilateral lenders working with the same country.